Although the Republican Party has historically deplored taxes, its most recent attacks on the Inflation Reduction Act of 2022 — which increases IRS funding by nearly $80 billion over a 10-year period — reach new depths of falsity, hypocrisy and potential danger to the nation’s financial stability.
Republicans allege that the IRS will deploy the additional funding to audit a larger proportion of lower- and middle-income taxpayers, which they claim would violate President Biden’s pledge not to increase taxes for taxpayers earning less than $400,000 in annual income. They claim that taxpayers will now live in greater fear of being audited, and of possibly having to pay taxes that they don’t even owe because they lack the resources to defend themselves.
But the Republicans’ crystal ball is clouded and cracked. First, a significant amount of the additional funds is dedicated to modernizing the IRS’s antiquated technology systems and enhancing customer service, both of which are in vast need of improvement. Second, the current commissioner of the IRS has explicitly vowed not to target lower- and middle-income taxpayers, an oath that Congress can and should take seriously and oversee. Third, although Republicans portray themselves as the party of law and order, and strongly opposed the Defund the Police proposals advanced by some Democrats, they now appear willing to turn a completely blind eye to tax scofflaws.
In fact, the Republicans’ repugnance towards tax compliance ignores several important realities. One is, because the nation’s voluntary compliance rate hovers in the low 80 percent range, approximately $400 billion in taxes go uncollected each year. Such uncollected taxes represent an additional financial burden upon those taxpayers who are compliant in fulfilling their civic duties. Another is that if the IRS conducts more audits, numerous empirical studies indicate that taxpayers are more likely to be forthcoming in their reporting practices.
The Wall Street Journal’s recent editorial, “The IRS Is About to Go Beast Mode,” epitomizes Republican concerns that the agency is poised to wreak havoc upon average taxpayers. However, over the past 20 years, Republican presidents and Republican-dominated Congresses have uniformly tried to do everything possible to subvert the agency, whose workforce has now been decimated and whose number of audits borders on nonexistent. At best, what the proposed funding will thus do is restore the IRS’s ability to function competently.
Regarding fiscal responsibility, the Republican party has traditionally prided itself on being the party of choice. However, at least as evidenced by its most recent foray into the tax arena, namely, the Tax Cuts and Jobs Act of 2017, it was projected to produce a gaping deficit hole of $1.5 trillion. Say what you may about the Democratic Party, but by contrast, the Congressional Budget Office projects that the proposed legislation will reduce the deficit by approximately $100 billion. With the nation’s overall debt currently hovering at around $31 trillion, this legislation makes a meaningful contribution toward fiscal responsibility.
Although the Inflation Reduction Act of 2022 will not transform the IRS into an agency universally beloved, it will hopefully make tax compliance and enforcement more equitable. Securing the nation’s sound fiscal footing fairly is surely worthy of bipartisan support.
Jay A. Soled is director of the Master of Accountancy in Taxation at Rutgers University.